McDougal, a former business partner and friend to President Bill Clinton and Hillary Rodham Clinton, was indicted Monday by the Whitewater grand jury. The three-count indictment includes two counts of criminal contempt and one count of obstruction of justice. The charges stem from McDougal's refusal to answer questions in front of the grand jury in the fall of 1996 and again last month.

Mark Geragos, McDougal's attorney, said she was "a little stunned" by the indictment but would continue to refuse to cooperate with the independent counsel.

"Susan McDougal is going to have nothing to do with this office of independent counsel. This office of independent counsel is conflicted; they've got a bias. She's not going to cooperate in any way shape or form," said Geragos. "They can just keep piling on her and piling on her in this unprecedented way that they've done but that's not going to do anything but steel her resolve.

"She will talk at the appropriate time in a public forum when there isn't a biased prosecutor like there is right now."

Geragos said McDougal welcomes the opportunity "to have a public airing out of all these things" in a trial on the contempt charges.

She is currently serving a two-year prison sentence for her 1996 conviction on fraud charges relating to a failed savings and loan that was the center of the Whitewater investigation.

Geragos repeated the contention that if McDougal testifies and tells the grand jury the truth, Starr will charge her with perjury. He said that the independent counsel has "vouched" for the testimony of David Hale, the prosecution's principal witness in the Whitewater investigation. But Geragos said, "It's been disclosed he was bought and paid for. That's the person that they say is telling the truth. She goes in and says he is not telling the truth and by definition, they are going to say that she is lying."

The situation has evolved beyond "he said, she said," according to Geragos, because Starr will not allow an independent investigation "that he's got a conflict of interest here, that he is biased."

One of the issues Starr wants McDougal to testify about is a $5,000 check she wrote and marked "payoff Clinton." Geragos said when the truth about the check "comes out it is going to be one of the most laughable things about this whole investigation."

He said McDougal would disclose what the check was about, but would not give any further details.